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Risk management tips for accountants

The importance of good risk management shouldn’t beunderestimated. Dealing with a professional indemnity claim can be costly andtime consuming, and most insurers will require you to be actively involved inthe process. If a claim goes to mediation or trial you could be looking athundreds of working hours being lost.

The good news is, there are many factors for accountants toconsider to improve risk management. Here are some key suggestions for reducingyour exposure to professional indemnity claims:

  • Issue engagement letters and follow the terms they contain
  • Confirm all new instructions in writing and keep the client abreast of the costs. Make it clear what you will advise on and what you won’t advise on.
  • Record and follow up all advice in writing.
  • Keep clear notes of all key meetings and conversations.
  • Ensure your own diary system is kept up to date and have a centralised diary so that if an employee is absent their work will be picked up. Missed deadlines are still the cause of many professional indemnity claims.
  • Advise clients of the risks if they fail to meet deadlines. Missed tax deadlines are a key area of concern.
  • Keep up to date with trends and developments in your area of expertise.
  • Don’t advise on subjects you are not familiar with. Clients have high expectations and in today’s increasingly litigious society, whether you’re at fault or not, they may take issue with the advice you have provided and seek compensation.
  • Don’t get too close to your clients as relationships quickly fall apart if problems arise. Likewise, ensure you vet all new clients - if a potential client has changed accountants regularly then there is usually a reason for it.
  • Carry out regular file audits and peer reviews; this should be done up to senior partner level.
  • Make sure that there are adequate financial controls in place to manage exposure to risk.
  • Have a clear procedure for dealing with and removing conflicts of interest. This compromises objectivity and professional judgement, leaving you liable to claims if compliance with the fundamental principles is seen to be threatened.
  • Have clearly defined IT and document management policies. Ask yourself: Do you have adequate security measures in place? Is there an internet use policy? And are electronic files and memory sticks protected against unauthorised access?
  • Know your professional indemnity policy. Be aware of your claims reporting obligations under the policy and make sure all staff are aware of their duty to report potential claims and circumstances which may give rise to a claim.
  • Make sure that the activities you carry out are covered by your professional indemnity policy. If you are engaging in different areas of business or dealing with clients in foreign jurisdictions make sure that your professional indemnity policy will respond if a claim is made against you.
  • For accountants who are members of an institute, such as the ICAEW or ACCA, make use of their websites which often provide guidance on the minimum terms with which you must comply and other insurance related information. 

For more information on risk management or our professional indemnity insurance policies for accountants, please call 0117 9293344 enquiry.professions@bluefingroup.co.uk

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